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Walk any length of State Street these days and you’ll find locked doors and empty, white-washed interiors where previously stood shops that buzzed with business and the cha-ching of cash registers. Instead of dressed up mannequins and colorful merchandise displays, you’ll see “For Lease” signs-many advertising reduced rent-posted by such companies as SIMA, the Radius Group, and Goodwin & Thyne.

Few can remember the last time State Street looked so empty, so it’s only natural that Santa Barbarans would wonder whether our town’s commercial core is dying, doomed by the country’s economic woes. Are the mom-and-pops going extinct? Will only national chains be able to weather this storm of recession?

For these answers and more insight, I chatted at length last month with three of State Street’s commercial real estate experts, namely Brad Frohling of the Radius Group, John Thyne of Goodwin & Thyne, and Anda Ashkar of SIMA. They assured me that such fears are mostly unwarranted, that a blend of national chains and hometown stores will always persist, and that Santa Barbara, as usual, is faring far better than most anywhere else.

By Paul Wellman (file)

Shoppers skitter around State Street’s Paseo Nuevo.

Each also explained how this market works, noting that unlike residential leases, which go month-to-month or year-to-year, commercial leases tend to be for five-, 10-, or 20-year periods. That means tenants who locked in low rates 10 or 20 years ago might not be able to afford current market prices when their lease is up for renewal, and that can account for some vacancies and “My rent skyrocketed!” sob stories. But it also means that some vacancies could result from landlords seeking higher-than-market rates today just to ensure that they don’t end up with tenants locked into lower rents if the market surges tomorrow.

As for the rates themselves-which are going down, but not as quickly as they are in the residential sector-the highest in Santa Barbara is in Paseo Nuevo, where retail stores lease for about $6.50 a square foot. Prices drop based on how far away from the mall you go and how big a spot you’re leasing. (Sizes range from 1,000 to 24,000 square feet.) But they never really dip below $3 a square foot on lower State Street.

As a comparison, shops on upper State between Las Positas and Hope Avenue lease for closer to $2.50 per square foot, while a shop on Manhattan’s Madison Avenue can fetch $21.75 per square foot. In Santa Barbara, these rates are “triple net,” which means that on top of the advertised rate, tenants also pay their share of the property’s taxes, insurance, and maintenance. That could add up to an addition $1 per square foot in the nicest spots. Brokers, meanwhile, make their money by taking a percentage of the lifetime value of the final lease. Finally, State Street properties-owned by everyone from longtime Santa Barbara families to new school investment groups-are rarely for sale. When such a property does come onto the market, it’s gone in days.

Here’s what else they had to say.

Brad Frohling, Radius Group

About 95 percent of the commercial leasing on the South Coast is controlled by Hayes Commercial, Pacifica Commercial, and the Radius Group, explained Brad Frohling, a senior sales associate with Radius. These companies help property owners find tenants and negotiate leases, much as realtors help buy and sell homes. Many are surprised to learn that none of the three are national brokerages. “It so happens that local boys do most of the business here,” said Frohling, who went on to note that Radius’s clients are dedicated to supporting homegrown businesses. “People have the impression that we’re seeing how to get rid of local business,” he said. “That’s never the case. Landlords are sympathetic and like local tenants.”

Paul Wellman (file)

RADD Thrift Store on State St. closed its doors in December.

But Frohling does “facilitate whatever the market is” based on a supply-and-demand formula, and sometimes that means national chains. Frohling has taken heat for being the agent who arranged Verizon’s takeover of the Italian & Greek Deli site on the corner of State and Ortega streets, but he explained that the deli’s owners made that decision because they owned the building. “They were able to double their income without making any sandwiches,” he said.

That’s not to say that national chains are always desirable, though. Frohling said national tenants can be difficult because they often require strict dimensions and other chain-consistent designs. But it goes beyond that too. “No one locally wants Santa Barbara to look like every other retail market in California,” he explained. “This is obviously a special town and a special market. : It’s just not all going to go to the national tenants. It just won’t happen. There’s still going to be a mix.”

The mix is one reason why Santa Barbara is doing better than elsewhere, with a vacancy rate remaining “relatively low” at 1.4 percent when, according to Frohling, “A lot of markets are now well into double digits.” Prices shot up quickly between 2004 and 2008, so Frohling calls this slowdown a “kind of natural correction.”

As did everyone contacted for this story, Frohling gave the current situation a positive spin. “This actually provides an opportunity,” he explained. “If rates come down, some of those business models that aren’t able to pay the top end maybe now can secure leases that enable them to operate.”

John Thyne, Goodwin & Thyne

The most positive spin of all came from John Thyne, whose five-year-old company built its popular reputation as a residential brokerage but is now actively involved in State Street commercial leasing. “This is a time when fortunes are made,” said Thyne. “It’s a dream market because, if you have the money and can lock in a deal for 10 years, three years from now it might be the greatest thing you ever did. State Street is going to be a thriving center of our town for a long, long time to come.” He also noted that the market “goes up a lot faster than it comes down.”

Thyne said that many of the vacancies result from multiple leases coming due at the same time, roughly 20 years after State Street’s last major renovation. “People think, ‘Oh, it must be the economy that’s causing these vacancies.’ That’s not altogether true,” he said. Thyne’s explanation was not entirely endorsed by Frohling and Ashkar, who suggested that good management takes this “roll” into account and balances properties accordingly so that leases do not end simultaneously.

Thyne also said that “people need to know that just because they see a ‘for lease’ sign, it doesn’t mean that the property is available.” Sometimes signs are used solely for advertising as a new tenant sets up shop, sometimes they are used to push a tenant into inking a deal, and sometimes a property actually sits empty even though the lease is still being paid. This last scenario was the case with Pep Boys on lower State, which closed in November 2007 but paid the lease through August 2008, when the contract ended.

The Pep Boys building is also Thyne’s example of how his clients are helping save the little guys. After first trying to turn the property into a bowling alley but being denied liquor permits, the landlord is now breaking it up into an upstairs office space, two State Street-fronting restaurants, and five to seven smaller restaurant spaces in the former parking lot behind the building. Thyne praised the plan, saying, “[My client] wants to make sure that mom and pops have a place to go.”

But Thyne is experienced in national chains too, having brokered the deal that’s moving Forever 21 into the massive Anthropologie space on the corner of State and Canon Perdido. (Anthropologie is moving up the street to the SIMA-owned San Marcos Building.) He said that national companies usually have cash reserves and don’t bicker over the small stuff, but he also realizes these are minor considerations for a town worried about chain takeover. “This is a philosophical debate that plagues every commercial real estate market in the country,” said Thyne. “In my opinion, Santa Barbara is a very special place, based on the fact that you don’t have big box stores everywhere you turn. I don’t think it would be in the overall best interest of landlords on State Street for us to go the way of Los Angeles or Ventura or Santa Monica.”

Anda Ashkar, SIMA

Compared to brokerages like the Radius Group and Goodwin & Thyne, SIMA-which both owns and manages properties-is a much different beast, with equally unique advantages and challenges. “We’re the largest in terms of property ownership and management that’s local,” explained senior vice president Anda Ashkar, who said the company owns more than half-a-million square feet in town, from El Paseo and the San Marcos Building to Victoria Court and the Pierce Building on lower State.

Being owners allows SIMA to be more flexible with its tenants, said Ashkar, explaining, “We see across the board what’s going on. It’s a better playing field. : We can be way more creative in structuring deals, giving people some time to get off the ground where they don’t pay rent on day one. We’ll incubate you for awhile.”

Ashkar also believes that SIMA is more attuned to the market than others. “We check in and look at prices on a weekly basis,” she explained. “If a property hasn’t moved, we ask, ‘Is it outdated? Is there something physically wrong? Is it priced too high? What is it?’ Shame on us if we ignore the situation.” That attention has kept tenants coming. “Even in this market we have some people lining up for the space,” she said. “Some tenants don’t even balk at the rent.”

But over the years, SIMA has gained a reputation around town as, in Ashkar’s words, “the big, bad landlords,” and former renters have complained about the company not responding to basic maintenance requests while simultaneously treating them poorly as tenants and boosting their rent. (This newspaper leased its former quarters in Victoria Court from SIMA. The complaints reported here come from other former SIMA tenants.) The company is also often blamed for bringing in national chains such as Old Navy and Peet’s Coffee while kicking out beloved institutions such as Restaurant Nu and Alpha Thrift.

Ashkar was hired less than two years ago, in part to repair the company’s image and work more collaboratively with the community. She’s since cleared house and hired a new, young staff, whom she repeatedly tells, “An image is only as good as the people behind it. How you carry yourself and represent yourself to the community is how you’ll be perceived.” Is it working? “I believe we’re making those changes one deal at a time,” said Ashkar. “It’s going take time to turn a reputation like that around.”

Also part of “being proactive” in that regard involves solidifying the company’s dedication to Santa Barbara store owners. “Our preferred route is to work with mom-and-pops,” she explained. “If we can help local people and put money in their pocket, they spend it locally.”

But no matter who SIMA works with, Ashkar said that any flexibility on SIMA’s part “requires [tenants] to be honest and tell us what they can and cannot do.” When a tenant stops paying rent and becomes uncommunicative, then there’s little option for an owner. “We work as long as we can with them. When you ignore us and you don’t talk to us and we’re chasing you for four months, there’s a point where the only way to get your attention is to start the legal process,” said Ashkar. “Some people tend to run, others face the music. It’s really a tenant-by-tenant basis.”

Although everyone agreed all commercial leasing in Santa Barbara truly is a case-by-case situation, Ashkar was able to point out at least one similarity. “One thing I can say is that no one calls to say, ‘Thank you so much. I love paying rent,’” she joked. “That call never happens.”

I'm not entirely convinced by what Matt tellingly labels as "spin." The national economy may indeed be having a significant effect on retail in SB. As my for mother-in-law was fond of saying, "No peddler goes around crying, 'Rotten fish for sale'."

When I was a kid Santa Barbara was a "hometown". I used to come up for three weeks or so in the summer from Santa Monica and stay with friends who had a ranch on Los Conoas. My folks had lived in SB in the fifties and had strong ties,still do. This was a BIG Italian family. Kind of like Walton's mountain, Italian style. The names Ferragamo and Champi were well known. And not just for shoes and football. These families had their hands in every aspect of the community. From the Mission to the lettuce fields. I used to help Josephine (Champi) Simpson pick herbs and vegetables from her garden and deliver them to Mom's Italian Village.

I saw 2001 A Space Odyssey and Harold and Maude at the Arlington. So many great memories. Watching her son Tom play baseball for UCSB. Jo Had no daughters and I used to follow her around like a puppy. Helping out, a good Italian tradition,you always help out. Josephine also worked part time at the White House on State Street. In those days everybody knew everybody. I could walk around for hours, all day long and talk to "neighbors" on State Street. I would run something down to Josie's friend Grace and Grace would send me to another shop...etc...Everyone was a part of everyones else's life. The whole town was a co-op.****continued in the next comment section....see below

I now live on Figueroa, two blocks off State. I walk State Street every day. It breaks my heart. The "Mom and Pop" businesses are expiring. When I ask most say," Can't afford the rent...or getting pushed out by the BIG guys...or no can spend money right now...we are a "resort town"...we only get weekend traffic. I need to sell Seven days a week".

I had an idea and shared it with Roger Horton (City Council) that perhaps it would be possible for there to be NON-profit retailers in SB. I had heard about short term month to month rentals occurring all over the country in towns where the economy was having a huge impact on the "Hometown Main streets". Maybe people could set up a business, like the YES store, temporarily. It would give the street energy and life. The dead space is ominous and depressing. It needs to somehow be kept active. A dead space has no income. These dead spaces could be presenting a very real opportunity. It is time to get creative.

I think a large Non-Profit Co-Op would be grand. Maybe in the Pep boy space or the Pier One space. We could have a seven-day a week Farmers Market inside a "green grocer" of local growers. It could work like a Shtetl (Yiddish), a market place that comes up in the day and goes down at night as in Europe and Britain.

Thereby using the space and at a relatively low cost to a variety of merchants. Maybe the City could buy a lease on one of these "White Elephants" and make it a permanent thing.

I am so sad to see this great town turn into a bunch of big name brands with no heart. I walked down Main Street in Ventura the other day. It was really sweet. Nice little Mom and Pop stores and eateries. Folks knew each other. They said hi to people as they walked by.It took me back.

A favorite memory was going to Moms with Jo and one of the old Italian guys would take me out back and hand me some long spaghetti to feed to the "feesh". He would giggle as he handed me the two foot long noodle and point to the "feesh". The minute the "feesh" would gobble up the long noodle, it came out the other side of the fish in exactly the same shape. Like a rope, in one side out the other. The little Italian man would hoot and holler..."feed the feesh".

I miss that Santa Barbara with all my heart and I want it back. I think it is possible. I want to make it possible for my kids.

Well I'm a downtown mom-and-pop business owner and a gal who took a few journalism classes in college and I gotta say, how the heck do you justify an article on commercial leasing without talking to any business owners?! That's like interviewing the administrators to find out about campus life at college. Why don't you do some leg work and track down some people who actually pay those big State Street rents, or who are locked into those fabulous 10-year leases you mention (can you give even one example, please) or who had to close a good business due to eviction, and hear their "sob stories" directly. (And thanks for that kind and intelligent characterization of tenants' reactions to rents doubling and tripling. Rents don't rise on their own; landlords raise them.) Instead you let the big brokers give lip service to how "special" our market is, and say landlords "like local tenants" and a good mix of business "will always exist," while giving no examples of a thriving local business. What's that hokum about the national economy not affecting us? It affects us in every way, and the problems with fuel and wholesale prices have been affecting business behind the scenes since long before the recession hit consumers. Obviously that wasn't within the scope of this article but that is the big stinking pile under the story, and you let those highly self-interested parties brush it off. Instead Mr. Thyne gushes about how this is when fortunes are made... right.

SIMA is holding a lot of empty sq footage right now, no doubt. And there's something wrong with a State Street w/ SO MANY EMPTIES. Something is wrong when owners are SO compinsated off-market that there is an incentive to keep these places empty. As for Peet's coffee, mom and pops had a lot of time to offer a warm coffe house that serves damn good coffee. It didnt happen. RoCo coffee isnt in the same league with Peet's, and is cold as hell in the winter. Starbuck's coffee aint as strong.I like Peet's.

I think state street has enough coffee pushers. Too bad they are mostly chains ( I prefer north star). Thanks for the insight NItz, I was feeling like the article was missing your side of the story. Maybe that'll be the focus of next week's issue...

Seems to me that there's a goal to push out the mom & pop type of business from State Street & bring in the big retail names. The mentality behind this push is it will attract the L.A./O.C. crowd to do some tourist shopping in our area. Thing is this: Has anybody considered that the L.A./O.C. crowd wants to get away from the big retail names? I've met many retailers on the State Street scene & they seem to feel they're being pushed out. I hope this ain't the case :) henry

Nice article. Too bad it's all blathering b.s. State Street is a wounded beast thanks to our ineffectual, biz-ignorant "mayor" and her City Council amateurs, none of whom have ever had to make a payroll via retail. Dumb is as dumb does.

when I wrote "coffee house"...what I was getting at was a "coffee house" in the Greenwich Village tradition of a coffee house...man you can really get nailed by young readers who have not had the benefit of older traditions...geeze.I was describing something Mom and Pop owned and cozy...all the corporate bean houses are COLD.Elsie's acts a lot like a coffee house...without the coffee.You know...mis-matched couches and chairs and a fire...made of wood..not a lamp in a fire place...like Red's...just place it farther up State st...I am certain Red's cannot afford to do what they do on State...no one can afford to...I know I am off topic...rainy days and Mondays.....betcha won't relate to that either...I had to remove a dead rat out of my kids rat cage just now and I feel I can do whatever I want for the rest of the day..Ew!My point is that there is nothing cozy about any Coffee joint on state right now...and when I am paying $4 for a cup a joe,I want cozy!Northstar is Ok,but that fake fire thingy(yuck) ...but and I mean BUT,,,they do have the BEST spiced Chai latte.State Street in general is cold and heartless..there isn't a pub or a tavern to really hang out in...Thursday thru Sunday nights on lower State are bloody terrifying and offer nothing if you are over 21.I miss politico taverns and deli's and coffee houses, places where people hang and talk.

I'm sorry if you were offended by my comment. It is true that fortunes are made in markets like this but I am also very aware of, and sensitive to, the challenges facing small businesses since I am a small businessman and represent several others as an attorney. - John

I am a mom-and-pop retailer and always heard cautionary tales from colleagues about leasing in SB. It's really pretty simple. The amount of money a landlord can get is the most important consideration for them, which works against one of a kind retailers who are learning as they go all the things for which chains have dedicated departments. Leases generally don't have escape clauses, and you are locked into paying even if you are physically unable to conduct business; this makes moms and pops think hard before they do sign that lease. You may go bankrupt even if you have a good concept and work super hard. Lease is a lease and it is going to be written with interest of landlord first, second and third. Pep Boys were paying for additional nine months after they closed? Wow. I wish more landlords understood the huge impact their decisions have on the community. This is not only about business, but also about quality of life of many.

First off, let me say that is does sadden me to see more and more chain stores EVERYWHERE you go. But I think it's ignorant to assume that the reason why is because landlords have a vendetta against mom and pops. The primary reason landlords lease spaces (and everyone goes to work in general) is to make money. If you could take a job that was a sure thing at a higher salary versus one that was cooler but lower paying and might not work out, I think a lot of people would take the former. We live in a capitalist society. I'm not saying the system is ideal, but I think it's one-sided to criticize landlords for rents because 1. they can only charge it if people are willing to pay it (and ps. chain stores only survive if enough customers shop there, even in SB) and 2. they aren't running non-profits and there's nothing intrinsically wrong with that. Of course, plenty of landlords are bastards but plenty of general population is too. And yes, my family does own real estate (not in SB) so I have a certain perspective, but I also have been a renter for years so I know what it's like on the other side. Just a thought...

Yes, I agree with most of what you wrote, chubbo, and of course, the idea of a vendetta is absurd. Still, our cities would be so much more varied and interesting if landlords were willing to accept a little more risk. For landlords to not consider the impact their choices have on a community is not appropriate. It is not just business. These are the places in which we spend our too-short lives. And I do know what it's like on the other side, too...

I've only been involved in real estate for 25+ years, part of that in commercial, so take what I say with a grain of salt.

First, the world turns, the world changes and sadly, unless folks are organized, owners call the tune.

Some owners have owned for a long time and have room for flexibility. That doesn't mean that they are going to be more sympathetic, just that they have greater ability to indulge their generous side. Others stuck their necks out and paid a high price (whether as individuals or a partnership) and really need to get a certain rate, or default on their representations or obligations.

Markets are not really controllable. Experienced folks can make conservative plans that enable them to ride out tough times. This is truly biblical: seven fat years, seven lean years. Unfortunately, a lot of compensation plans favor risk: if it works out the owner/syndicator makes out like a bandit. If not, well, it's the market, who knew? In many cases, they played with OPM: other people's money. Little personal downside, lotsa upside.

It's not a public utility. That said, I'm truly in favor of preserving our local flavor. I urge others to support local business. I have a bias against chains. They can sell stuff at bargain prices by exploiting tax laws, foreign labor, and economies of scale. But they rarely provide jobs that would enable an employee to afford to raise a family in SB.

The economic downturn was long overdue. We were engaged in an unsustainable shell game that was fueled largely by an administration beholden to business interests. The federal gov created favorable conditions for greed and profit to pump up a material addicted populace. Now the chickens come to roost.

It's not entirely a bad thing to have a down cycle. Relationship will be the buzz word of the near future. The natural environment will have a better chance with a reduction in consumption. We will become more globally attuned by necessity. We will learn how satisfying it is to help others and put our own woes in perspective.

No one interviewed has a real depth of experience. Each has a clear agenda and it's not to preserve a local business base, it's to satisfy the needs and desires of their clients. As it should be.

If you want positive change, vote with your choices, support your friends and neighbors, and look for the good. It's there and that's really what's special about our home. We are lucky, indeed.

Just be careful. We are a little Galapagos. There are more aggressive, more acquisitive folks from the larger world that would chew us up and spit us out. Look them in the eye, ask the tough questions, and check the bona fides. The world is yours to create.

SIMA! I remember when my boss signed a new lease with SIMA. They brought down a photocopy for his file, and he realized they had WHITED-OUT AND CHANGED THE DOCUMENT HE HAD SIGNED. Their new management is missing the point here. Younger employees won't change the company's bad reputation -- ethical behavior will.

Another big problem with retail downtown is that there are so many homeless people. If the City wants it's tax base, and landlord's want their spaces filled, and the community wants places to shop, then deal with the homeless problem. It is rediculously bad. I routinely walk along State Street in the evenings and there are at least 5 homeless people on each block. And I never see any police officers. Why? They'd rather write tickets to college kids because that generates revenues. Short sighted! By allowing the homeless issue to fester, the City is killing it's sales tax revenue by driving out businesses. No wants to go shopping downtown when you have to step over homeless people.

I'm probably coming off a bit harsh towards the homeless. It is a sad situation. But allowing them to sleep on our stoops and harrass our potential customers is not helping them.

I have a solution to this whole landlord/rent problem. Support local businesses-instead of coming into my shop and asking if you can get it cheaper at Costco (which by the way, the answer will always be yes, unfortunately we can not get the 1,000,000 quantity discounts like they can) If you want to be able to enjoy courtyard restaurants and charming shops that support local vendors, buy from us, then we can pay our crazy State Street rents and maybe even take home a paycheck to enjoy some of those restaurants and shops ourselves. . .

"Still, our cities would be so much more varied and interesting if landlords were willing to accept a little more risk. For landlords to not consider the impact their choices have on a community is not appropriate. It is not just business. These are the places in which we spend our too-short lives." Just logging back in to say, that I think I have the best landlord in SB, which is why I even have a business downtown (off State St.). He is truly committed to small business, doesn't use a broker, and came and secret-shopped my store to check out our customer-friendliness before offering us the lease on his space. All of his tenants are family-owned and operated. He has several storefronts and makes plenty of money (I assume), perhaps not as much as he "could" make but without the hassles of frequent turn-over which is inevitable when you gouge your tenants. He probably gets an offer a day to sell out to some big investor, but his properties have been in the family since the 1940's and he seems to just want to pass the nice steady income on to his kids and pass some of his good fortune off to the town and the small business owners he rents to. I know, hard to believe, isn't it? I'd bet it's safe to say that every long-term small business in this town is either occupying its own building (like Italian-Greek deli did until recently) or has a similar landlord to ours.